Thursday, July 11, 2013

It's Getting Closer - Don't Say I Didn't Try To Warn You

If the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse  - Seth Klarman, money manager, via Zerohedge

We'll know the collapse is coming sooner rather later when CNBC's viewership plummets to nothing - Dave and Friend of Dave circa mid-2002
That Zerohedge link is worth the quick read.  It has been reported over the past couple of weeks that CNBC's viewership has fallen to all-time lows this year.  It's a trend that's been ongoing since the economy crapped out in 2007.  In fact, the New York Post has reported that Larry "Cocaine Brain" Kudlow's show - "The Kudlow Report" has been cancelled, citing that viewership in its key demographic, 24 - 50 yr olds - is off 60%.  Kudlow's rise and fall as Chief Economist at Bear Stearns (he fell victim to a vicious cocaine, pill and alcohol addiction) was emblematic of the way in which Wall Street as a whole will rise and fall.

Interestingly, the Fed-money printing-driven pop in the stock market has done nothing to reverse the falloff in CNBC's viewership.  And Fox Biz and Bloomberg barely have any viewers.  It tells me that most people understand that the big stock market move higher is completely artificial and absurd.

And don't say I didn't warn you about your 401k's and IRA's.  Orrin "Magic Underwear" Hatch has introduced legislation to "create a new public retirement plan in which insurance companies pay benefits through annuity contracts"  (New York Times).

Annuities?  I have written some posts over the years in which I said that eventually the Government will takeover the retirement fund system and replace what you have with an annuitized fund that will be primarily funded with Treasuries.  It's a most convenient way to keep the Treasury bond treadmill funded when foreign buyers like the Chinese disappear.  I also said back in 2003 that before the system collapsed, the elitists would sweep every last crumb of public wealth off the table and into their own pockets - the last great asset of the public being the $16 trillion in retirement assets.

If you look at Hatch's biggest contributors by industry, #1 is Securities and Investments and #4 is Insurance:  LINK  I suspect that at some point in the legislative process that JP Morgan and Goldman Sachs will barge their way into seats at the retirement fund feeding trough.  Certainly they've given Mr. Magic Underwear enough money to earn that seat.

Now that the Government spies on every aspect of everyone's life - with Hatch's full support, especially given that the massive multi-billion dollar NSA facility which houses all the computers used for its esponiage is conveniently situated in Utah and Obamacare is proving to be a complete financial clusterf*ck, now it's the Government's turn to takeover your retirement funding.

Good luck to you all who keep your money in your IRAs.  Don't cry that you weren't warned when it happens in totality.


  1. Hi Dave, I hope you can answer a question. I understand the concept of the government wanting to pilfer retirement funds - it makes perfect sense from a money-grab sense. But if, for example, you own bonds in your IRA how can the government override that debenture agreement? Wouldn't the borrowing company have something to say about that? Same for equities...if you trade in and out of stocks, Wall Street profits from that activity...won't they have something to say about the government trying to subjugate your 100 shares of Apple? I understand where you're coming from in principle, but the details of how it would be done escape me. Thanks for the work, it's appreciated.

    1. You don't own the bond. It's held in street name. See the MF Global case. The Government can do anything they want now. The NSA situation should have made that clear to everyone.

      It's in the Patriot Act, Homeland Security Act and Detainee Bill: the Government can do what it wants and you have no say.

  2. Thanks for the reply Dave. Please understand I'm not debating whether it can happen - I'm conceding that. I'm simply confessing that I need to learn and educate myself on the machinations of what it would look like to the layperson. So, for example, if I held 1000 shares of some random General Motors preferred stock, the plan would be to replace that preferred in my account with an "equal value" annuity backed by treasuries, and then the government would simply become the new owner of that GM preferred stock? Is that the basic idea? I'm familiar with the MF Global case, but not the machinations of how it was all perpetrated, and that's what I want to understand, thank you.

    1. This comment has been removed by the author.

    2. I had to think about it for a while and figured it out last night but just remembered to answer your inquiry about what it will look like.

      All retirement accounts will collectively be turned over to a couple Wall Street firms who "bid" for the business. I'm sure the biggest campaign contributors will get it. The existing stocks and bonds will be set up in a trust and managed by the firm.

      A couple favored insurance companies will be selected to issue and manage annuities that be used replace the assets hypothecated from the individual accounts. The asset trusts managed by Wall Street will be used to generate cash flow for the annuities. So the insurance companies will be like the "pass-thru" agents for the cash flow from the trusts.

      Insurance companies will be responsible for collecting all 401k and IRA contributions from employers and individuals. That cash will be used to buy Treasury bonds from the Govt whenever the Govt auctions Treasuries to raise money. When the Govt is required to fund public pensions, it will just issue Treauries to the annuities backing those trusts and the Fed will print money to give to the Government.

      It will look something like that. You'll get a statement from the insurance company showing the "value" of your annuity fund and the insurance company will issue you your monthly retirement payment.

    3. Thanks for taking the time, Dave, have a good weekend

  3. Is America experiencing a failure cascade?


    By this schema America has slid into phase three, where a large fraction of citizens feel helpless — unable to influence the course of public policy or the evolution of American society.

    Phase four begins when people find new sources of identity, and develop new loyalties. If this follows the predictions of Martin van Creveld in The Rise and Decline of the State (1999), these will be either supra-national (eg, religion, ethnic, ideological) or sub-national (eg, regional, local, or even communal groups).

    If these are non-political loyalties, allowing our elites to reign undisturbed, this might produce the oligarchic New America. That’s the current trend.

  4. Davey

    It's an interesting cycle of events. Most pensions prior to ERISA were funded by insurance companies (with CIGNA coming to mind as "one of the biggest" pension providers,)and the assumptions were not unlike annuity assumptions. The basis of a insurance company sponsored pension calculation (even in the late 70s and early 80s) seldom topped 3% or 4% and this forced the companies to make large contributions to meet future payouts. As labor became educated by banksters and wall street, labor insisted that their pensions would be better off in the market. The companies agreed, as the new 6% 0r 7% market based assumption would keep the pension funded and lower the mandatory company contributions. It worked for a brief time. BUT by 1998, 2 labor unions I worked with were happy to accept 10% assumptions on future earnings. Everybody was drinking the NASDAQ coolaid. Those pensions went under and are now tax-payer liabilities at PBGC.

    I'm just noting the cycles. And, BTW, I admonished my union buddies for accepting the 10% assumption which in 3 short years (with the 2000 crash) drove their pension bust.

    Hatch's argument is pure "establishment" genius but a blunder if the markets ever clear and return to true price discovery. Hatch is talking about ending the future funding gap on current PUBLIC pensions. (the term public pension raises the question "Whose money is it?")

    Yes, he's enriching insurance companies and providing public funding/liquidity for the debt markets (as insurance companies invest primarily in bonds.) BUT He's NOT stripping the IRAs of people. These "underfunded pensions" are always defined benefit plans structured to pay monthly income. An IRA or self-directed plan cannot be "under-funded." Hatch is trying to find a way to take the future funding pension liability off of state, federal and municipal balance sheets.

    Hatch is just re-living the cycle. he wants to create these restrictive vehicles just before "the great flush and cleansing" will set-up a great new equity market for 2017 and on.

    Hindsight is not 20-20. Hindsight is usually smeared with fecal matter and forces folks to relive cycles and mistakes while gagging on crap.

    This is not a theft of iRAs or personally controlled 403bs or tax sheltered retirement vehicles.

  5. Capital expenditure across the world is expected to decline this year and next, according to a new report by rating agency Standard & Poor's (S&P), which warned that hopes of it driving an economic recovery were unfounded.

    S&P said that despite a modest recovery in capital expenditure (capex) following the financial crisis, it slowed again in 2012, and is expected to contract by 2 percent in real terms this year. Initial forecasts for 2014 are for it to continue to slip, falling by 5 percent year-on-year.

    "A modest post-crisis recovery appears to be stalling before it has really begun," S&P said in its annual survey, which looked at the 2,000 global companies which spend the most on capex (non-financial investment on physical assets like buildings and machinery).

  6. Now if I can get my wife to eventually agree to buy gold instead of throwing money down her 401k! Sigh..

  7. Come on, Dave. You know CNBC's viewership will NEVER plummet to nothing. You only need Becky Quick, Julia Boorstin, etc to wear NOTHING on TV and CNBC's viewership will blow through the roof!

    By the way, good analysis on GOFO. Good enough to debunk the crap of Izabella Kaminska the Whore at FTAlphaville.

    1. Izabella is a complete idiot

      Becky Quick is gross w/out make-up. I want to see Trish Reagan naked


      "[Y]ou have to take control of him. Control means financial, sexual or psychological control... This is intended to start our conversation on your next phase" – CEO George Friedman to Stratfor analyst Reva Bhalla on 6 December 2011..."

      How much information are you willing to give Trish Reagan for all your personal information? How many men and women did Reva Bhalla sleep with to get what Stratfor wanted? The trogan horse these days come in beautiful packages and will give you a night you'll always remember as you sit behind bars for the rest of your life on false charges against you (and that's before you even see the judge and judy).

      I doubt Trish or any of Putin's bimbos on RTAmerica are really that sexy without any kind of touch-up. Stick with Navy Salt, guys. You ain't missing much.

    3. Have long haven't you watched CNBC, Dave? Trish Regan works for Bloomberg now. However, our favourite clown Jim Cramer is still at CNBC. Maybe you would like to see him naked.

  8. Private eyes: Garfield wants to bolster police surveillance network with residents' cameras

    GARFIELD — Police here are looking to expand their surveillance dragnet by enlisting owners of private security cameras into a city-wide network.

    "Every time we have a burglary or other big investigation, the detectives are out looking for cameras," said Sgt. Joe Marsh, a patrol supervisor and member of the city's gang unit.

    Police frequently make use of privately-owned cameras mounted on stores and outside homes, but not all cameras are created equal, and police need to access footage quickly in the early hours of an investigation.

    "We've run into problems where people had cameras that wouldn't perform or they didn't know how to retrieve the video off the camera," Marsh said.

    The city owns somewhere north of 20 cameras of its own, mounted at schools and major thoroughfares and near critical infrastructure, Marsh said. But a survey done by police in February found 218 privately-owned cameras within the city, and now police are going door-to-door asking the owners of those cameras to opt into a program they're calling Garfield EyeCam.

    Garfield's program will start with a census of willing participants, collecting information about the makes and models of surveillance cameras so that the Bergen County Sheriff's Bureau of Criminal Investigation Unit can be deployed quickly to retrieve footage captured near the scene of a crime.

    "Depending on the amount of cooperation, we'll go into the next tier of asking people to access their cameras directly," Marsh said. That would mean linking them with the department's system so cameras can be monitored remotely from the station.

  9. July/ August 2013 Special Deal The shadowy cartel of doctors that controls Medicare.

    That doctor spoke to me on condition of anonymity in part because all the committee members, as well as more than a hundred or so of their advisers and consultants, are required before each meeting to sign what was described to me as a “draconian” nondisclosure agreement. They are not allowed to talk about the specifics of what is discussed, and they are not allowed to remove any of the literature handed out behind those double doors. Neither the minutes nor the surveys they use to arrive at their decisions are ever published, and the meetings, which last about five days each time, are always closed to both the public and the press. After that meeting in April, there was not so much as a single headline, not in any major newspaper, not even on the wonkiest of the TV shows, announcing that it had taken place at all.

    In a free market society, there’s a name for this kind of thing—for when a roomful of professionals from the same trade meet behind closed doors to agree on how much their services should be worth. It’s called price-fixing. And in any other industry, it’s illegal—grounds for a federal investigation into antitrust abuse, at the least.

  10. A good read.

  11. Jailed Journalist Barrett Brown Faces 105 Years For Reporting on Hacked Private Intelligence Firms.

    Journalist Barrett Brown spent his 300th day behind bars this week on a range of charges filed after he used information obtained by the hacker group Anonymous to report on the operations of private intelligence firms. Brown faces 17 charges ranging from threatening an FBI agent to credit card fraud for posting a link online to a document that contained stolen credit card data.

    But according to his supporters, Brown is being unfairly targeted for daring to investigate the highly secretive world of private intelligence and military contractors. Using information Anonymous took from the firm HBGary Federal, Brown helped discover a secret plan to tarnish the reputations of WikiLeaks and journalist Glenn Greenwald of The Guardian. Brown similarly analyzed and wrote about the millions of internal company emails from Stratfor Global Intelligence that were leaked in 2011.

    ...the case against Brown could suggest criminality "to even link to something or share a link with someone."

  12. How Much Is the US Government Spying On Americans?

    Even now – after all of the revelations by Edward Snowden and other whistleblowers – spying apologists say that the reports are “exaggerated” or “overblown”, and that the government only spies on potential bad guys.

    In reality, the government is spying on everyone’s digital and old-fashioned communications. For example, the government is photographing the outside information on every piece of snail mail. The government is spying on you through your phone … and may even remotely turn on your camera and microphone when your phone is off.

    As one example, the NSA has inserted its code into Android’s operating system … bugging three-quarters of the world’s smartphones. Google – or the NSA – can remotely turn on your phone’s camera and recorder at any time. Cell towers track where your phone is at any moment, and the major cell carriers, including Verizon and AT&T, responded to at least 1.3 million law enforcement requests for cell phone locations and other data in 2011. (And – given that your smartphone routinely sends your location information back to Apple or Google – it would be child’s play for the government to track your location that way.) Your iPhone, or other brand of smartphone is spying on virtually everything you do (ProPublica notes: “That’s No Phone. That’s My Tracker“).

    The government might be spying on you through your computer’s webcam or microphone. The government might also be spying on you through the “smart meter” on your own home.

    The FBI wants a backdoor to all software. But leading European computer publication Heise said in 1999 that the NSA had already built a backdoor into all Windows software. And Microsoft has long worked hand-in-hand with the NSA and FBI so that encryption doesn’t block the government’s ability to spy on users of Skype, Outlook, Hotmail and other Microsoft services.
    (And leading security experts say that the NSA might have put a backdoor in all encryption standards years ago. … meaning that the NSA can easily hack into encrypted communications.)

    “Black boxes” are currently installed in between 90% and 96% of all new cars. And starting in 2014, all new cars will include black boxes that can track your location. License plate readers mounted on police cars allow police to gather millions of records on drivers … including photos of them in their cars.

    A security expert and former NSA software developer says that hackers can access private surveillance cameras. Given that the NSA apparently already monitors public cameras using facial recognition software, and that the FBI is building a system which will track “public and private surveillance cameras around the country”, we can assume that government agencies might already be hacking into private surveillance cameras.

    In early March, at a meeting for the CIA’s venture capital firm In-Q-Tel, CIA Director David Petraeus reportedly noted that “smart appliances” connected to the Internet could someday be used by the CIA to track individuals. If your grocery-list-generating refrigerator knows when you’re home, the CIA could, too, by using geo-location data from your wired appliances, according to SmartPlanet.

    “The current ‘Internet of PCs’ will move, of course, toward an ‘Internet of Things’—of devices of all types—50 to 100 billion of which will be connected to the Internet by 2020,” Petraeus said in his speech. Items of interest will be located, identified, monitored, and remotely controlled through technologies such as radio-frequency identification, sensor networks, tiny embedded servers, and energy harvesters—all connected to the next-generation Internet using abundant, low cost, and high-power computing—the latter now going to cloud computing, in many areas greater and greater supercomputing, and, ultimately, heading to quantum computing.

    (And there is more.....)

  13. A CARELESS mistake by Microsoft programmers has revealed that special access codes prepared by the US National Security Agency have been secretly built into Windows. The NSA access system is built into every version of the Windows operating system now in use, except early releases of Windows 95 (and its predecessors). The discovery comes close on the heels of the revelations earlier this year that another US software giant, Lotus, had built an NSA "help information" trapdoor into its Notes system, and that security functions on other software systems had been deliberately crippled.

  14. Next time someone tells you "I use Linux and I'm safe", read this this story:

    "The Open Source Software Institute, a non-profit group that supports open-source adoption and the National Security Agency (NSA), the organization in charge of all out of country eavesdropping, will co-host an Open Source Software Industry Day on Wednesday, May 30, 2012. The unclassified, one-day event will be held at the Johns Hopkins University Applied Physics Laboratory's Kossiakoff Conference Center near Fort Meade, MD, which is where the NSA is based.

    If you were one of the lucky 640 to make it in, you'll get to hear about agency's interest in opportunities made available through open source software solutions. Yes, the NSA is looking for a few good spooks. The conference's speakers will present information on existing open-source software products, as well as service and support offerings; and encourage government suppliers to include open-source options in their strategies and service offerings.

    Open-source software and the National Security Agency go together like peanut-butter and jelly. No, they really do!"

    (bet there's NSA code somewhere in the Linux Kernel or its dependencies)

  15. To me, the template for the retirement/IRA confiscation is quite clear... because the asset grab in Russia after the USSR collapse provides the blueprint for the coming theft here.

    What will happen is the govt will take all your stocks and bonds in your retirement acct and "pay" for them by substituting in crappy untradeable Treasuries that might pay a whopping 2%. That way they will say it really isn't theft because they paid you for them. So then the govt will own these valuable private sector securities. Then the govt will sell these assets ("to reduce the public debt") to the thieves, liars, con-artists, cronies, and other assorted assholes who make up our "elite". Then the screwing will be complete.

    How screwed will you be? Suppose you have $1 million in your IRA thanks to depriving yourself of the fruits of your labor for 40 years in order to fund your retirement. Instead of owning stocks and bonds which might throw off 5% or more in yield and whose dividends could increase (that's $50,000/year for the math-challenged), you would have Treasuries that you can't get rid of that pay $20,000. But you have Social Security, right? Oh, wait, those payments will be cut 25% BY LAW when the fund outgo equals the income.

    Answer: really screwed.

  16. 150 loans were all collateralized by the same apartment building.

    Spain has set up a "bad bank" known as Sareb (Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria). This operation has $66 billion of Real Estate loans and property as their assets we are told. So far they have sold 700 properties and they claim they can achieve an annual return on equity of 13%-14% over its fifteen year tenure.

    You see, I was not joking; Spain is out with a wonderful new fantasy competing with the Hobbits, "he who cannot be named" and the land of the Munchkins. Who knew, besides the Portuguese, that the Spaniards could be so inventive? Madrid has outdone itself and Don Quixote has returned to the capital.

    Sareb has roughly 107,000 properties and 90,000 loans they tell us. The loans are collateralized by about 400,000 pieces of Real Estate. This all sounds fine as presented but then Sareb started looking at what they actually owned. "Oh no Pancho," 150 loans were all collateralized by the same apartment building. "Oh no Rodrigo," six banks had all lent money to one downtown building and each bank had the same collateral. "Oh no Manuel," we are holding a deed as collateral on a building that does not exist. The problem is that each example that I have presented is not an isolated instance. Such a good tale; invisible buildings, documents relating to non-existent people, collateral shared by everyone and held at face value at Sareb.

    What to do, what to do? So Spain turns once again to Clifford Chance. This is the same firm that assured us of the health of the Spanish banks. Another fairy tale please. One more story told around the campfire to engage the investors. One more piece of Pulp Fiction.

  17. Eric Sprott

  18. Your Personal Gold Standard By James Rickards

    There isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The point is whether they will have to.

    I’ve had conversations with several of the Federal Reserve Bank presidents. When you ask them point-blank, “Is there a theoretical limit to the Fed’s balance sheet?” they say no. They say there are policy reasons to make it higher or lower, but that there’s no limit to the amount of money you can print.

    That is completely wrong. That’s what they say; that’s how they think; and that’s how they act. But in their heart of hearts, some people at the Fed know it’s wrong. Luckily, people can vote with their feet.

    I always tell people who say we’re not on the gold standard that, in a way, we are. You can put yourself on a personal gold standard just by buying gold. In other words, if you think that the value of paper money will be in some jeopardy, or confidence in paper money may be lost, one way to protect yourself is by buying gold, and there’s nothing stopping you.

    Still, central banks don’t want to go to a gold standard. But if gold is a barbarous relic, if gold has no role in the monetary system, if gold is a “stupid” investment, then why do the Chinese have 5,000 tonnes? Are they stupid?

    If some scenarios play out, you are going to see the price of gold go up… a lot. And it may go up a lot in a very short period of time. It’s not going to go up 10% per year for seven years and the price doubles. It’s going to chug along sideways, maybe in an upward trend, with a lot of volatility. It will have a kind of a slow grind upward… and then a spike… and then another spike… and then a super-spike. The whole thing could happen in a matter of 90 days — six months at the most.

  19. A new wave of buyers from China is injecting billions of dollars into the US residential real-estate market.

    Chinese investors spent $12.3 billion on US real estate over the 12 months ending March 31, according to the latest data released by the National Association of Realtors (NAR).

    When Chinese housewife Alice Zhang of California saw a house in her neighborhood advertised for $1.23 million, she told her husband, "Nobody will buy that house quickly at such a high price."

    One week later, they were surprised to hear that the single family home in Silicon Valley had been sold and their new neighbor was from China.

    "This house was definitely a bargain at under $1.1 million just six months ago when we purchased our house," Zhang told China Daily.
    "Our new neighbor paid cash, and that's why the owner made the decision to sell so quickly," she said.
    Over the past year, foreigners made $68.2 billion worth of real estate purchases in the US, 18 percent of which were Chinese, according to the NAR.

    The median price of homes purchased by Chinese was $425,000, higher than all foreign buyers' median of $276,000.

    Some 70 percent of the Chinese buyers used cash to pay for their homes in the US, according to a report on CNN on Monday.

    An official with the Asian Real Estate Association of America (AREAA) said she didn't see any increase in the number of Chinese buyers who chose mortgages, due to the strict examination process at US banks. "I have seen more and more Chinese house buyers come with cash," said Huang Jiaying.

  20. Putin Dresses Down The Group of Eight
    The diplomatic source reported the Russian President as saying: “You want Russia to abandon Asad and his regime and go along with an Opposition whose leaders don’t know anything except issuing fatwas declaring people heretics, and whose members – who come from a bunch of different countries and have multiple orientations – don’t know anything except how to slaughter people and eat human flesh. You use double standards and approach the crisis in Syria using summer and winter styles under one roof. You lie to your own peoples so as to further your interests. This is none of our business. But it is impermissible for you to lie to us and to the countries and peoples of the world, because the international stage is no longer yours alone. Your ability to monopolize it the way you did two decades ago is now gone for good.”

    Putin continued: “In Syria all of you are standing on the side of the forces that for the last 10 years you have claimed to be fighting against under the rubric of ‘fighting terror.’ Now today you are with them, helping them to take power across the region. You declare that you’re going to arm them and work to facilitate sending their fighters to Syria to bring it down, weaken it, and break it up.” Putin asked, “In God’s name what kind of democracy are you talking about? You want a democratic regime in Syria to take the place of the Asad regime, but are Turkey and the countries you’re allied with in the region blessed with democracy?”

    Putin addressed US President Obama specifically, saying: “Your country sent its army to Afghanistan in the year 2001 on the excuse that you are fighting the Taliban and the al-Qa‘idah Organization and other fundamentalist terrorists whom your government accused of carrying out the 11 September attacks on New York and Washington. And here you are today making an alliance with them in Syria. And you and your allies are declaring your desire to send them weapons. And here you have Qatar in which you [the US] have your biggest base in the region and in the territory of that country the Taliban are opening a representative office.”

  21. Will The Federal Reserve Provide Us With The Next Abuse Of Power Scandal?

    After internal leaks and disclosures two of the most powerful agencies of the U.S. government, the Internal Revenue Service and the National Security Agency, are under increased scrutiny. Will the same happen to the more independent but still secretive Federal Reserve System? A new thriller, “Hidden Order,” which focuses on the Fed and is written by best-selling author Brad Thor, will fuel speculation about misdeeds at the powerful monetary authority. Going after the Fed, however, is not easy. Incentives to protect the status quo are even stronger than at the IRS or the NSA.

    We are approaching the first anniversary of the passage of H.R. 459, the Federal Reserve Transparency Act, which called for audits of the discount policies, the funding facilities, the open market operations, and the Fed agreements with foreign bankers. The bill was passed 327 to 98. Ninety-seven of the votes to protect the Fed came from Democrats. The bill remains stuck in the Senate.

    Transparency in monetary affairs is an issue of justice and morality, not only economics. Several of the first books devoted to economics focused on the perils of government monetary manipulation and were written by moralists of the late middle-ages. Oresme in Italy, Copernicus in Poland, and Juan de Mariana in Spain were prime examples.

    If we can’t count yet on price increases to mobilize public opinion to battle the current statist monetary system and scrutinize the Fed, is it possible to rely on arguments describing the immorality of the manipulation of money and credit? Making a credible case against credit manipulation is more difficult than making a case against price inflation. It requires a more elaborate analysis and getting into specifics: which banks and credit institutions were benefited, which suffered? Within banks, which executives lobbied for privileges and received big bonuses? It is not enough to blame “corporate welfare,” “crony capitalism” or the “banksters.” Sound money advocates should describe and have access to data from the Federal Reserve to study how they distributed their favors.

  22. Coup d’etat

    Paul Craig Roberts

    The American people have suffered a coup d’etat, but they are hesitant to acknowledge it. The regime ruling in Washington today lacks constitutional and legal legitimacy. Americans are ruled by usurpers who claim that the executive branch is above the law and that the US Constitution is a mere “scrap of paper.”

    An unconstitutional government is an illegitimate government. The oath of allegiance requires defense of the Constitution “against all enemies, foreign and domestic.” As the Founding Fathers made clear, the main enemy of the Constitution is the government itself. Power does not like to be bound and tied down and constantly works to free itself from constraints.

    The basis of the regime in Washington is nothing but usurped power. The Obama Regime, like the Bush/Cheney Regime, has no legitimacy. Americans are oppressed by an illegitimate government ruling, not by law and the Constitution, but by lies and naked force. Those in government see the US Constitution as a “chain that binds our hands.”

    Like serfs in the dark ages, American citizens can be picked up on the authority of some unknown person in the executive branch and thrown in a dungeon, subject to torture, without any evidence ever being presented to a court or any information to the person’s relatives of his/her whereabouts. Or they can be placed on a list without explanation that curtails their right to travel by air. Every communication of every American, except face-to-face conversation in non-bugged environments, is intercepted and recorded by the National Stasi Agency from which phrases can be strung together to produce a “domestic extremist.”

    If throwing an American citizen in a dungeon is too much trouble, the citizen can simply be blown up with a hellfire missile launched from a drone. No explanation is necessary.
    For the Obama tyrant, the exterminated human being was just a name on a list.

    The president of the united states has declared that he possesses these constitutionally forbidden rights, and his regime has used them to oppress and murder US citizens. The president’s claim that his will is higher than law and the Constitution is public knowledge. Yet, there is no demand for the usurper’s impeachment. Congress is supine. The serfs are obedient.

  23. Bill Black: The Banks Have Blood on Their Hands

    We invited Bill Black to return to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.

    In the US, our regulators have publicly embraced a “too big to prosecute” doctrine. We are restraining, underfunding and dismantling regulatory oversight in the interests of short-term stability for the status quo. Which as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impugnity.

  24. Granny’s Gold Bars Are Key to Vietnam Push to Boost Dong

    The target of Vietnam’s campaign to stabilize its currency is in the locked bedroom wardrobe of retired civil servant Vu Thi Huong: gold bars.

    “It’s been my habit for ages, buying gold whenever I can save up some money,” said Huong, 57, who watches the financial news every day to monitor the price of the precious metal. “With gold, I can save my fortune and later on have something valuable to pass down to my children and grandchildren.”

    Huong is among millions of Vietnamese who hold an estimated 300 tons to 400 tons of bullion to store their wealth -- valued at as much as $19 billion at domestic prices and equal to official U.K. holdings -- a legacy of more than a century of war, revolution and economic turbulence. The central bank wants to convert the hoard, much of it smuggled in, into dong deposits to strengthen the currency, which has slid 21 percent against the dollar in five years.

    Private gold holdings “reflect both the Vietnamese cultural values as well as the lack of confidence in the dong,” said Trinh Nguyen, Hong Kong-based economist at HSBC Holdings Plc. “High inflation and depreciation of the dong in the past have caused people to keep their savings in gold.”

  25. Gold Deliveries From Shanghai Bourse Jump on Physical Demand

    Physical gold delivered to buyers by China’s largest bullion bourse in the first half of this year almost matched the entire amount taken from its vaults in 2012, and was more than double the country’s annual production.

    The Shanghai Gold Exchange supplied 1,098 metric tons in the six months through June, compared with 1,139 tons for the whole of last year, according to data from the bourse today. Output in China, the world’s largest gold producer, reached a record 403 tons last year, according to the China Gold Association.

    The surge in deliveries underscores buying interest in China, which may pass India as the largest bullion consumer as early as this year after the government in New Delhi raised import taxes while regulators in Beijing made investing in the metal easier. Miners, smelters and refineries are required to sell gold via the Shanghai bourse, the only state-sanctioned marketplace for spot bullion in China.

    “The number shows demand for bullion as an underlying asset in China that investors here remained big buyers of the physical commodity this year,” said Fu Peng, a commodity strategist in Beijing at Galaxy Futures Co, a brokerage controlled by the country’s sovereign wealth fund.

  26. Hi Dave, tonight I watched an interview with a fellow named Gavin Thomas who as you may know is involved in gold mining here in Australia. His comments may be of interest to you and your readers.
    I'm not sure if you be able to access the ABC service call iview there is a link from the website. The program air Monday 15 July.


  27. Bernanke's comment

    Bernanke is renowned as a preeminent expert on the causes of the Great Depression. We share the view that understanding this historic downturn is indeed "the Holy Grail of economics". Bernanke's views of monetary policy "mistakes" made early in the 1930s profoundly shaped the Fed's monetary policy doctrine following the post-tech bubble downturn and then even more so during this extended post-mortgage finance bubble period.

    I take strong exception with what has over decades become a distorted revisionist view of the 1920s and 1930s periods. For starters, I'll take issue with the general context of how Bernanke explains the objectives of the new Federal Reserve back at its inception in 1913.

    The US economy and banking system had suffered through decades of destabilizing boom and bust cycles. While having a central bank to help manage systemic liquidity issues during crisis periods was advantageous, the critical role for the Federal Reserve was to more effectively regulate credit - to try to avoid crises. There was a clear appreciation at the time that credit and speculative excesses were the bane of financial stability.

    It is worth noting that Bernanke and others' historical accounts of the 1920s basically disregard a crucial fact: the Federal Reserve patently failed in its responsibilities to safeguard financial stability during that period. It basically accommodated a runaway boom. By intervening to limit downturns and backstop system liquidity, the Fed nurtured historic financial and economic bubbles. It failed in regulating credit and it failed in dealing with historic financial excess. Its policies were instrumental in what evolved into epic economic maladjustment and imbalances on a globalized basis.

    Bernanke and others gloss over these failures, preferring instead their ideological focus on activist central bank post-bubble "mopping up" stimulus and market interventions. When Milton Friedman in the early-1960s canonized the 1920s as the "Golden Age of Capitalism", this seemingly brought to an end the critical evaluation of one of the most relevant periods in financial, economic and policy history. The focus shifted to post-bubble policy activism.

  28. Rock-A-Bye Baby

    Outside of Bernanke’s counterfactual and economically illiterate “wealth effect” argument, even the members of the Federal Reserve have no idea what transmission mechanism would link further increases in the monetary base to any increase in economic activity or employment. There are already trillions of dollars of idle reserves in the banking system. Why keep pushing on a string when pushing it relieves no constraint that’s binding? You just have more string to tangle, trip on, and reel in later.

    In short, QE benefits stocks primarily because investors have come to believe that QE benefits stocks – a belief that is ultimately likely to be added to the long list of extraordinary popular delusions and the madness of crowds. Investing based on expectations of more QE is not an act of analysis or a response to investment merit, but is instead an act of blind faith that borders on superstition.

    Question: Do the members of the Federal Reserve have any idea how large a contraction in the monetary base would be required now, simply to normalize short-term interest rates by even a fraction of a percent at some point in the future? Based on the tight historical relationship between the monetary base (per dollar of nominal GDP) and short-term interest rates, we estimate that the Fed would have to contract its balance sheet by more than $500 billion simply to engineer the first quarter-point increase in the Federal funds rate. While Bernanke’s words last week were taken as a promise of virtually unlimited QE and the abandonment of “tapering” plans by the Fed, his point was actually much the same as the one expressed three separate times in the latest Fed minutes: “decisions concerning the pace of purchases are distinct from decisions concerning the federal funds rate.” No kidding.

    Meanwhile, with a monetary base of $3.27 trillion and an estimated duration of at least 7 years on present Fed holdings, the recent 100 basis point move in bond yields has created a loss of over $200 billion for the Fed. The Fed reports capital of only $55 billion on its consolidated balance sheet. but then, just like major banks, the Fed does not mark its assets to market. Most likely, the Fed is now technically insolvent. Moreover, the Fed is levered more than 59-to-1 even against its stated capital. The benefits of QE seem vastly overpriced and excessively trusted, particularly in an environment where the internal debate even within the Fed is becoming more pointed. Two members already want the Fed to taper in order “to prevent the potential negative consequences of the program from exceeding its anticipated benefits,”

  29. Michael JacksonMonday, 15 July, 2013

    The poor babies at cnbc. They are so worried about 2 quarters of negative GDP while blind to the real reasons behind this country's decline is unsound economic policies. It's so bad that USBank here has a Reno Toyota car sitting in their parking lot, with all sort of "interest-rates advertising" on its windows (2.9% interest), trying to sucker people into it. I've never seen this done here before in Nevada and it's a sign of a desperate auto industry joining forces with a desperate banking industry. Without real growth in consumer income, they have no money to spend. sales are down to 0.4% and I believe those number are still inflated higher. The thought is that next quarter will be better. How? gasoline sales were down so that means the consumer doesn't have any money to go anywhere. Q4 is holiday season, not Q3. what? school supplies for back-to-school is going to improve GDP? LOL!

    Everything is retracting (which it should) while inflation is showing in food prices. The debt in the system is going to pop somewhere, the Fed Reserve Board will try to contain the fire unsuccessfully before it gets leaked out to the public (like the 2008 crash), and then hell breaks loose. The Fed, already over their heads with Q3, will find itself useless in the situation as they are underwater in worthless assets. The global community will demand it being replaced by a UN department more corrupt and then more of US Sovereignty will be stripped from us as we'll really have no control of anything pertaining to fiscal economics in this country as well as subject to a "Global tax" (just a possibility.....).

    Better hang on to something. There's another shock wave coming.....

  30. More Pain for India's Economy

    The New York-based Economic Cycle Research Institute, which specialises in doomsaying, has predicted more pains for India as the depreciating rupee has not only exposed the economy to a risk of stagflation, it may face recessionary pressure in the future if the current trend of low trend growth and frequent spikes in business cycles continues for long.

    Stagflation in an economic situation when inflation remains high for a long time and growth falls below trend with higher rate of unemployment. Recession is contraction of an economy for two consecutive quarters.

    Anirvan Banerji, co-founder and chief research officer at ECRI said that the fast descend of rupee may lead to more spikes in consumer prices and lower economic expansion.

    "In any case, inflation in India is not sufficiently controlled. It is already too high. And the top it, there is the depreciating rupee, leading the economy to stagflation," Banerji said

    Reserve Bank of India governor Duvvuri Subbarao however dismissed of such a threat last month saying that the central bank was sensitive to growth concerns but not at the cost of higher inflation. The banking regulator resisted itself from reducing key short term rates in its last monetary policy review as the fall in rupee makes imports costly and puts pressure on prices of essential goods.

    "India also faces one-third possibility of its economic downswings turning into recessions in the long run as its trend growth has slowed and cycle volatility increased," ECRI's Banerji said in an exclusive interview with ET. He said either a higher trend growth or a lower cycle volatility reduces the risk of a recession.

    Banerji said the current combination of very low trend growth and high cycle volatility across the spectrum, may lead an overwhelming majority of slowdowns into recessions, especially in the developed economies. At the other end is China, where none of the slowdowns are recessionary, because they have very high trend growth even now.

    Banerji showed concerns over India's growing dependence on exports as most developed nations which buys goods and services from India are facing slow economic expansion. The US, one of India's major trade partner, has shrunk its imports growth to negative.

  31. “The Matterhorn Interview – July 2013: F. William Engdahl”

    German investigative journalist Lars Schall met economic researcher and geopolitical analyst F. William Engdahl for a special series of 3 video interviews. In Part One, “The Race Out of the Door” (19 minutes), Engdahl discussed, inter alia: the deeper causes for the financial crisis; modern banking as a giant confidence game; America’s so called “Asia Pivot” and the Trans-Pacific Partnership; the bubbles in American stock and global bond markets; and too much power in too few hands on Wall Street.

  32. Michael JacksonMonday, 15 July, 2013

    "Long-time readers are well aware of the Generational Dynamics prediction that the world is headed for a major global financial panic and crisis, causing all bubbles to implode, including the stock market, commodity and gold bubbles. It's impossible to predict when that will happen, or what event will trigger the panic, but every once in a while I try to point out a time when things look particularly dangerous.

    One of those times is now. A couple of months ago, I warned that the stock market was rising rapidly and becoming dangerously parabolic (May 5, 2013). That parabolic rise is continuing. The S&P 500 Price/Earnings ratio (also called "valuations") was at 18.45 on Friday morning, according to the Wall Street Journal. Friday's huge stock market surge spiked the P/E ratio up to 18.63 by the end of the day -- above the extremely high levels that it reached during the massive real estate and credit bubble of the 2006-2007 time period. The S&P 500 P/E ratio has been above its historical average (14) continuously since 1995, and by the Law of Mean Reversion will crash to around 6 or lower, as it last did in 1982, and stock prices will fall proportionately.

    According to my Dow Jones historical page, the market is now at 218% of its current long-term historical trend line value of 6838. This is an extremely high bubble level, though not as high as the 264% that it reached on the peak on October 8, 2007. However, this may indicate that the new parabolic bubble may surge even further before crashing.

    To say that there is no rational explanation for this parabolic stock market spike is an understatement. China's economy is slowing, and Europe's economy is going down the tubes, while America's economy is about to be hit by the Obamacare train wreck and financial disaster.

    The major factor causing the stock market spike is the Fed's "printing" of $85 billion per month of new liquidity for banks. According to mainstream "economists," that money should be going out as loans to individuals and small businesses, which it is not. Instead, that money is making its way to investment bankers and wealthy investors who are using the money to expand the stock market bubble.

    A second reason why money is pouring into Wall Street is apparently that many investors are fleeing Europe. The Cyprus bailout, which confiscated 60% of the assets of wealthy investors, and the statements of European politicians that it could happen again, is frightening large investors into taking their money out of European banks, according to some reports, and some of this money is reaching Wall Street.

    The Cyprus bailout shows what happens when politicians become desperate. Three months ago, confiscating 60% of bank accounts was so completely unthinkable that the mere suggestion would have drawn contemptuous laughter. But now it's a fact. What will the politicians in the Obama administration do when they become desperate? It's impossible to predict, but it's certainly clear that nothing is off the table."

  33. Michael JacksonMonday, 15 July, 2013

    "Tonya Hernandez thought a home loan would help build her family’s future. It ended up pushing her into a financial black hole.

    In 2005 she and her husband, Rafael, used equity in their North Las Vegas home to buy two condominiums they could rent out for extra income. “We were trying to build our retirement,” Hernandez, a social worker, said of the $191,000 loan. “Everyone always says you can’t lose with real estate.”

    Everyone was wrong. The economic crash that started in 2008 wiped out trillions of dollars in wealth, including the Hernandez’s home equity. Now the couple is dreading the arrival of 2015, when the equity loan will reset to an unknown, yet likely higher payment.

    They want to negotiate a new mortgage with a principal that reflects the home’s current value of about $80,000 as well as a stable and affordable interest rate.

    But they have hit only frustrating dead-ends, in part because the original loan was bundled with others into a security that trades on the global financial markets. The loan servicing company is unable or unwilling to help the couple cut a new deal with the distant, faceless owners of the note.

    That’s why she was excited to learn that North Las Vegas has embraced a controversial program that would use its power of eminent domain to seize underwater mortgages, pay the investors only what the property is now worth and then let other investors write new mortgages with terms more favorable to the homeowners."

  34. The Fed’s illusory policies are paving the way for a market collapse worse than 2008

    The other imbalances in a real economy

    In a real economy, like that of the United States, things can be imported. Thus, excess demand can leak out of the economy and stimulate producers abroad. If demand leaks in this way, excess demand does not produce inflation but, instead, current account deficits in the balance of payments (CAD, which appear when imports exceed exports). Since these deficits are settled with debt, countries pay for this excessive demand not with higher prices but with higher debt.

    Thus, the measurement of imbalances should include two components: inflation and current account deficits. Adding the share of nominal GDP that is wasted in price increases (inflation) and the share of GDP that goes abroad (current account deficits as a percent of GDP) you get a measure of the extent to which monetary creation does not spur more domestic production but only price increases and more imports.

  35. In Part Two below, “There is No Such Thing as a Free Market” (11 minutes),

    Engdahl shares his interesting views on the managed nature of the precious metal markets; the naked short selling in the paper gold and silver markets; the rising gold stocks in vaults in China; the declining gold stocks in Western vaults; and the long-term perspectives for both physical gold and silver.
    “Below is Part 2: There is No Such Thing as a Free Market”

  36. "The Federal Reserve is not only leaving the punch bowl in place," he said, "we're continuing to spike the punch, though at a decreasing rate over the next year." - Richmond Fed President Jeffrey Lacker (via CNNMoney)

  37. Clarification of William Kaye re: German / US gold in Hong Kong refineries?

    Due to the fact that Mr. Kaye did not reply anything at first, I thought that this might be one more of those sensational stories that the internet is swamped with.

    Yet, yesterday Mr. Kaye got in touch with me, saying that my message ended up in his spam folder. We then talked via Skype about the topic that he raised recently with King World News. Here’s the recording of our conversation:

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